TaxTMI 
TaxTMI 
2002 (8) TMI 76
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....upon the said property transferred and the company shall own, enjoy the property as absolute owner and deal with the property in any manner it likes. The letter also stipulated that the transferee shall be bound to return the property after the revocation of transfer and the transferee is also given the power to change or alter or remake the property or ornaments made weight by weight. The assessee relinquished all her rights and benefits that may be considered as accruing to her during the period of 74 months. The transferee-company accepted to receive the property and conveyed its acceptance to the terms and conditions by making an endorsement on the letter dated April 12, 1982. The above transfer gave rise to interesting questions under the Gift-tax Act, and the first question that arose was whether there was a gift by the transfer of property in favour of the company by the assessee and the second question that arose was how the value of the transferred property should be evaluated, and if it is incapable of evaluation, whether the transfer is chargeable to gift-tax. The Gift-tax Officer held that it was a gift as the transfer had been made voluntarily and without considerat....
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.... of jewellery (27 items of gold, diamonds, rubies, etc. stated to be of the value of Rs. 7.5 lakhs) to the company called, M & L Investments Pvt. Ltd., would amount to a gift?" Mr. P.P.S. Janarthana Raja, learned counsel appearing for the assessee, submitted that the transfer of property did not amount to a gift as the transfer is revocable and what was granted under the deed of transfer was only a right to use the jewellery for a period of 74 months and it does not constitute a gift. Learned counsel also submitted that the provisions of section 6(2) are not applicable in the case of gift of ornaments or jewellery, they do not generate income and since there was no income from the jewellery or ornaments gifted, the provisions of section 6(2) of the Gift-tax Act are not applicable and the value of the property transferred cannot be charged to tax. Learned counsel referred to the decisions of the Supreme Court in Khoday Eswarsa and Sons v. CGT [2001] 251 ITR 883 and in CIT v. B.C. Srinivasa Setty [1981] 128 ITR 294. Mr. T.C.A. Ramanujam, learned counsel for the Revenue, on the other hand, submitted that under the provisions of the (lift-tax Act, the transfer in question is a gi....
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....fied period, the value of the property gifted shall be the capitalised value of the income from such property during the period for which the gift is not revocable." It is also necessary to refer to rule 11 of the Gift-tax Rules, 1958 which is as under: "11. (1) In the case of property referred to in sub-section (2) of section 6 of the Act, the capitalised value of the income shall be taken to be the product of the number of complete years included in the period for which the gift is not revocable and the average of the income received from the property during the three years or such lesser period of complete years in which such property was in existence, preceding the previous year for the year of assess-ment after discounting it at a rate of 4 per cent. per annum. Provided that where the property was in existence for less than one complete year preceding the previous year for the year of assessment or came into existence in the previous year for the year of assessment, the income from such property for one complete year shall be the income which would have been receivable, if the property were in existence for one complete year. (2) The income from such property for each....
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....finition of the expression, "gift" and the definition of "gift" contemplates the transfer of property from one person to another. The term, "transfer of property" under section 2(xxiv) of the Gift-tax Act is fairly wide and comprehensive enough to include any disposition, conveyance, assignment, settlement or delivery of property, and it also includes the creation of a trust in property and the grant or creation of any lease, mortgage, charge, easement, licence, power, partnership or interest in property. The term is also defined to include any transaction entered into by any person with intent to diminish directly or indirectly the value of his own property and to increase the value of the property of any other person. In view of the wide meaning of the expression, "transfer of property" in section 2(xxiv) of the Gift-tax Act, we are of the view that there was a transfer of property by the assessee in favour of the private limited company and the transfer was made voluntarily and without consideration. Though the transfer was revocable after a period of 74 months from the date of execution of the letter of transfer, the mere fact that it is revocable does not take away the charact....